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POLL-Rate hike in store for Norway, lone among peers

Reuters | Oslo | Updated: 14-06-2019 16:50 IST | Created: 14-06-2019 16:35 IST
POLL-Rate hike in store for Norway, lone among peers
Image Credit: Pixabay

Norway's central bank is expected to raise its key interest rate on June 20 and to continue to tighten monetary policy later this year as domestic strength trumps a global economic slowdown, a Reuters poll found on Friday.

In the survey of 29 economists taken on June 11-13, all but two predicted the policy rate would rise to 1.25% next week from 1.0% currently, in line with the central bank's own forecast made last month. Norges Bank hiked rates last September for the first time since 2011 and raised them again in March this year against a backdrop of solid economic growth and rising inflation.

The board's stated aim of tightening policy this year is in contrast to the Federal Reserve, the European Central Bank and other major central banks, which are either on hold or contemplating monetary easing. A business survey release by Norges Bank this week showed output had accelerated in the last three months to the highest in seven years, and that the outlook remained firm on the back of rising investment by oil companies.

"Despite international turbulence, domestic momentum is solid, in particular, due to strong petroleum activities. Consequently, we believe Norges Bank will raise the policy rate in June and bring the next hike forward to this autumn," Handelsbanken said in a research note. While the Reuters poll predicted the policy rate will rise to 1.50% in the fourth quarter of 2019 and to 1.75% by the end of next year, the risk posed by rising global trade tariffs and weaker growth could also cap rates at a lower level.

"For the new (rate) path we expect a higher probability of a December hike and relatively low probability of a hike thereafter," DNB Markets wrote.


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